As Airbnb has grown, usage has become increasingly common outside of Manhattan and in lower income neighborhoods with few hotels, where hosts are also more likely to offer “individual room” (rather than “entire home”) listings. The fraction of booked “entire home” listings in neighborhoods with below-median average household income grew from 17% in 2011to 27% in 2016 and the fraction of booked individual room listings in these neighborhoods grew from 41% in 2011to 50% in 2016.

Short-term rentals do not appear to be as profitable in New York City relative to long-term rentals as many assume, and they have become relatively less profitable over time.In 2016, the average unit would have needed 216 days as a short-term rental to match the annual average revenue it would have earned as a long-term rental, with average break-even levels ranging from under 190 days in Brooklyn and Queens to 237 days in Manhattan.

The significant variation across neighborhoods and in modes of use suggests a need for a regulatory approach that addresses this variation. Higher taxes and fees on high-usage units (that would also generate revenue for the city) or short-term rental caps and licenses for uncapped units are examples of such approaches.

The researchers also outline the advantages and disadvantages of different regulatory approaches to discourage the conversion of long-term to short-term rentals.

“Around the world, local governments are trying to institute an appropriate regulatory response, but they are doing so without vital evidence about usage patterns, geographic considerations, and the economic impact of both long- and short-term rentals in this new space,” the authors explain. “We do not advocate for a specific regulatory approach. Rather, we use an economic lens to identify approaches that preserve value while minimizing negative spillovers on neighborhoods.”